Nationwide profit drops amid low interest rate environment

Nationwide reported a drop in profit on Friday as it pointed to ongoing low interest rates.

In the nine months to the end of December, statutory pre-tax profit fell 16% to £946m, including £68m of derivative and hedge accounting gains which are excluded from underlying profit.

Meanwhile, underlying pre-tax profit declined to £866m from £1.1bn as net interest income declined and underlying costs rose.

The net interest margin, which is the difference between interest received and paid out, fell to 1.33% from 1.56% due to the impact of sustained levels of competition in the mortgage market combined with continued natural attrition of the residential base mortgage rate balances and the impact of medium term interest rate expectations.

Gross mortgage lending grew 11% in the period to £26.2bn, representing a 14.3% market share and the building society said the number of new current accounts opened rose to 570,000 from 419,000 in the nine same period in 2015.

Chief Executive Joe Garner said: “We have continued to trade strongly during the third quarter of the year, building on the success of the first six months. Our trading performance in the nine months to 31 December 2016 demonstrates our commitment to support members during these uncertain economic times to buy homes and save for the future.

“Our profit performance has reduced in line with our expectations and reflects in part the continued margin pressure due to the prevailing low interest rate environment and the conscious decisions we have taken to support our members. Statutory profit before tax in the nine months is £946 million, a decrease of 16% on the same period last year. Our capital and liquidity ratios remain strong, underpinning the security we provide to all our members.”